Here#39;s what McDonald#39;s said after a customer exposed no change in bill despite GST cut

If you are wondering why the bill you received from McDonald’s does not incorporate the revised GST rate for restaurants, the company has an explanation. McDonald’s India said that withdrawal of Input Tax Credit has resulted in increased operating costs which is why they have not revised the bill.

Input tax credit means that when a manufacturer pays the tax on his output, he can deduct the tax he previously paid on the input he purchased. As under GST, the cascading effect of taxes, i.e., tax on tax, has been avoided, a producer or manufacturer can claim the credit.

A Twitter user had complained to McDonald’s India alleging that one of its outlets was charging 18 percent GST despite the government lowering taxes to 5 percent for restaurants. Amogh Chaphalkar tagged McDonalds and Finance Ministry in a tweet and said, “Shame on you @mcdonaldsindia not passing on GST benefit to customers should be a crime @FinMinIndia Please take action!”

The image of the bill attached to the tweet showed that McDonald’s franchisee Hardcastle Restaurants Pvt Ltd had charged SGST and CGST at the rate of 9 percent each.

Shame on you @mcdonaldsindia Not passing on GST benefit to customers should be a crime @FinMinIndia Please take action! pic.twitter.com/P9J4gWNxfX

— Amogh Chaphalkar (@chaphya) November 15, 2017

In a statement on Twitter, the company said: “GST has come down from 18 percent to 5 percent, but Input Tax Credit has been withdrawn. Due to this, our operating costs have gone up by 10-12 percent. After taking the cost into account, the effective tax benefit would have been less than a percent. As a result, the prices of most of our products would have come down by just 1-2 rupees. That would not have made much difference to our customers.”

The food chain giant in its statement added that it was taking a “bold” move and making a “big” reduction in prices of its flagship products like Chicken Maharaj Mac, Big Spicy Paneer Wrap, Veg Maharaja Mac, etc.

“We have delighted our customers by reducing our prices by Rs 40-50…making the burger more affordable to all our customers,” the company said in a statement.

Earlier, National Restaurant Association of India (NRAI), an association of restaurants that represents more than one lakh restaurants in the country, said that the government’s proposal to reduce Goods and Services Tax (GST) rate without input tax credits will make eating out in restaurants more costly.

Similarly, food and beverage startups in the country had also said that meal prices could go up to 10 percent despite the reduction in rate as input tax credit was being withdrawn.